Risk Aspects of Investment-Based Social Security Reform

by Campbell, John Y.; Feldstein, Martin S.

• ISBN13: 9780226092553
• ISBN10: 0226092550
• Format: Hardcover
• Copyright: 2000-12-01
• Publisher: Univ of Chicago Pr

Summary

Our current social security system operates on a pay-as-you-go basis; benefits are paid almost entirely out of current revenues. As the ratio of retirees to taxpayers increases, concern about the high costs of providing benefits in a pay-as-you-go system has led economists to explore other options. One involves "prefunding," in which a person's withholdings are invested in financial instruments, such as stocks and bonds, the eventual returns from which would fund his or her retirement. The risks such a system would introduce--such as the volatility in the market prices of investment assets--are the focus of this offering from the NBER. Exploring the issues involved in measuring risk and developing models to reflect the risks of various investment-based systems, economists evaluate the magnitude of the risks that both retirees and taxpayers would assume. The insights that emerge show that the risk is actually moderate relative to the improved return, as well as being balanced by the ability of an investment-based system to adapt to differences in individual preferences and conditions.

Author Biography

John Y. Campbell is the Otto Eckstein Professor of Applied Economics at Harvard University and a research associate of the National Bureau of Economic Research.

Martin Feldstein is the George F. Baker Professor of Economics at Harvard University and president and CEO of the National Bureau of Economic Research. He is the editor of many books, including Privatizing Social Security and International Capital Flows, also published by the University of Chicago Press.

Table of Contents

Preface	ix
Introduction	1	(10)
John Y. Campbell
Martin Feldstein
Asset Allocation and Risk Allocation: Can Social Security Improve Its Future Solvency Problem by Investing in Private Securities?
Thomas E. MaCurdy
John B. Shoven
Stephen P. Zeldes
Discussion Summary	11	(30)
The Transition to Investment-Based Social Security When Portfolio Returns and Capital Profitability Are Uncertain
Martin Feldstein
Elena Ranguelova
Andrew Samwick
Robert J. Shiller
Discussion Summary	41	(50)
The Effect of Pay-When-Needed Benefit Guarantees on the Impact of Social Security Privatization
Kent Smetters
David W. Wilcox
Discussion Summary	91	(22)
Can Market and Voting Institutions Generate Optimal Intergenerational Risk Sharing?
Antonio Rangel
Richard Zeckhauser
Thomas J. Sargent
Discussion Summary	113	(40)
The Social Security Trust Fund, the Riskless Interest Rate, and Capital Accumulation
Andrew B. Abel
Deborah Lucas
Discussion Summary	153	(50)
Social Security and Demographic Uncertainty: The Risk-Sharing Properties of Alternative Policies
Henning Bohn
Kevin M. Murphy
Discussion Summary	203	(44)
The Risk of Social Security Benefit-Rule Changes: Some International Evidence
John McHale
David A. Wise
Discussion Summary	247	(44)
Financial Engineering and Social Security Reform
Zvi Bodie
Stephen A. Ross
Discussion Summary	291	(30)
The Role of Real Annuities and Indexed Bonds in an Individual Accounts Retirement Program
Jeffrey R. Brown
Olivia S. Mitchell
James M. Poterba
Mark J. Warshawsky
Discussion Summary	321	(50)
The Role of International Investment in a Privatized Social Security System
Marianne Baxter
Robert G. King
David Backus
Discussion Summary	371	(68)
Investing Retirement Wealth: A Life-Cycle Model
John Y. Campbell
Joao F. Cocco
Francisco J. Gomes
Pascal J. Maenhout
Amir Yaron
Discussion Summary	439	(44)
Contributors	483	(4)
Author Index	487	(4)
Subject Index	491